Donald Trump has dramatically reversed course on his sweeping tariff programme, announcing a 90-day pause for most nations while simultaneously escalating his trade war with China by hiking duties to 125 per cent.
The unexpected U-turn triggered an immediate market relief rally, with the S&P 500 surging 9%, the Nasdaq jumping 11% and the Dow Jones climbing 8% following the announcement.
In a characteristically blunt post on his Truth Social platform, the US president justified the China tariff increase citing “the lack of respect that China has shown to the World’s Markets.” Meanwhile, all other countries will face a substantially reduced reciprocal tariff of 10% during the pause period.
Treasury Secretary Scott Bessent attempted to frame the abrupt policy shift as deliberate strategy rather than a response to market turmoil, claiming “this was his strategy all along.” However, Trump himself acknowledged market concerns played a role, noting people were getting “yippy” and “afraid” after observing that “in the bond market, people were getting a little queasy.”
The announcement comes after a week of extraordinary market volatility that saw the S&P 500 shed nearly $6 trillion since Trump unveiled his “Liberation Day” tariffs.
More than 75 countries have reportedly contacted the US to begin negotiations over trade terms, with Japan, South Korea and Vietnam apparently first in line for talks. The UK, which faces the lowest baseline tariff rate of 10%, will “coolly and calmly continue to negotiate in Britain’s interests,” according to a Downing Street spokeswoman.
China reacted swiftly to Trump’s initial tariffs by raising their own duties to 84% on American goods, declaring they would “resolutely counteract and fight to the end” against what they view as “bullying.”
The sudden policy reversal narrows what had been an unprecedented global trade confrontation to a more focused economic battle between the world’s two largest economies, with Bessent describing China as “the most imbalanced economy in the history of the world” and the “biggest source” of US trade troubles.